5 Things Entrepreneurs Should Know When Raising Money

When attempting to raise money for their business goals, entrepreneurs find themselves thinking of creative and effective ways to do so. It would be simple to walk into a bank and receive a loan to start-up their new business, but this is not the case. This is because starting a new business is risky, and some banks may not provide enough leverage because of those risks.

#1. Search for an Investor

Besides self-funding, finding investors to back your new idea or product can increase your campaign as well. Sharing a solid business plan and convincing this individual, a group of individuals or company that your product or idea will be successful in the following years may be way you can add to your money-raising goals. An angel investor may work for you, by investing in your soon-to-be company. Finding an angel investor can be accomplished in several ways:  you can go online and search for angel investors, or you can contact high-profile businesses in your community for ideas. Even lawyers and accountants may have contacts for you, as many of these professionals work directly with high-end investors.

You can also reach out to venture capital firms in your local area or you can even apply for Shark Tank. Shark Tank is a reality TV show where entrepreneurs pitch their idea to the investors and ask for an investment in exchange for a percentage of their company’s equity. The Sharks are successful entrepreneurs and investors. The Shark Tank Cast’s net worth is between millions and billions of dollars. If your pitch is successful, it will be seen by millions of TV viewers which can sky rocket your sales too.  

#2. Make a Contract with Family

If you are close to family and friends, you have the ability to sit down and talk with them about your idea. Family and friends know you well enough to have a trusting relationship, and, if they have the funds, may allow you to borrow what you need until your business is up and running. They trust that you will pay them back once you begin making your profit.  However, always develop a contract, and treat this loan like you would a loan from a bank or investor.

#3. Pay on Schedule

Even when borrowing from your closest family member, be sure to set up a schedule on when each payment will be made, and be sure to include interest. Setting up a schedule for payment will put your family member or friend at ease. Even if your new business takes time to get off the ground, make your payment from other sources so you can stick to your agreement.

#4. Give Rewards!

If you are raising money for your new business, you may be able to collect more funds by crowdfunding with rewards. This incentive can get you more support from people who believe in your idea or product. The benefit of crowdfunding for your new venture is that it is not a loan towards you and you don’t need to repay; the only type of “repayment” is the reward you offer. You can give a free sample of your product to those who contribute a specific amount, such as $100. You may want to consider specific levels of rewards to match the higher donations to motivate people to pay in even more funds.

#5. Make Social Media Work for You

Well over 700 million people worldwide use Facebook to connect with friends, family, organizations, groups, businesses… you name it! While raising funds for your start-up, take advantage of this platform to make it work for you.  Attracting visitors to “like” your page can work wonders for raising money, such as by offering an incentive to your followers once a certain amount of “likes” has been achieved. You may even consider, once a milestone of followers has been met, doing a drawing for a larger reward, such as a gift card or one of your products.

The one important piece of advice for raising money for your business venture is to find multiple ways to reach out to a variety of people. By utilizing several different resources, your new business will be able to get off to a great start, and hopefully defy all the odds of today’s market and become very profitable.